Demand lifts Fonterra milk price forecast

• Published date: 24 June 2022
• Author: Jamie Gray
• Publication title: Bay of Plenty Times

The co-op has also outlined an organisational structure aimed at accelerating its long-term strategy and announced the departure of long-serving executive Kelvin Wickham after 34 years

Fonterra lifted its 2022/23 milk price range to $8.75-$10.25 per kg of milk solids, up from $8.25-$9.75 per kg.

This increases the midpoint of the range by 50 cents to $9.50 per kg.

Chief executive Miles Hurrell said the lift in the forecast milk price reflected the milk supply and demand picture and the current strong US dollar.

Hurrell said that the strong earnings guidance for next financial year reflected an expected recovery in some of the co-op’s key markets which have experienced margin pressures this financial year, coupled with ongoing favourable ingredients margins.

“The wide earnings range for 2022/23 reflects the current high level of uncertainty that comes with operating in a globally-traded, volatile market,” he said.

“While the co-op is in the position to be forecasting both solid earnings and a healthy milk price for the next year, significant volatility remains.

“These near-term headwinds had the potential to impact on some of the co-op’s targets.”

Fonterra released its 2030 long-term aspirations in September last year. “We’re still on track for our 2030 financial targets, but the last few months have shown that there will be some bumps along the way,” Hurrell said.

The co-op maintained its earnings guidance range of 25-35 cents per share for the current financial year, which ends on July 31.

Hurrell said a series of global events have changed some of the assumptions the co-op’s aspirations were based on.

“In particular, interest rates and inflation have lifted well above our assumptions, as have commodity prices in response to the continued strong demand for dairy.

“These input cost increases are impacting the cost of our debt in the short term and have also pushed...